Chapter 1 Outline
I. MARKET ECONOMIC SYSTEMS: AN INTRODUCTORY LOOK
A. Essential Features of a Market System
1. There are three essential features of a market system: private ownership, market exchanges, and market incentives.
B. Relative Price
1. A relative price is the price of one good in terms of another good.
2. Relative price measures what must be given up to purchase an item.
3. Relative price is the exchange value of a good.
a. In order for relative prices to provide information about exchange value to consumers, reasonable price stability is necessary.
C. Private Property Rights
1. In order for a market system to function well, private property rights must be defined, established, and protected by law.
a. Private property rights allow individuals base their decisions on their own self interest.

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